What is white labeling? It’s a process that has been around for a long time, but it is becoming more and more popular in today's society.
In essence, it’s applying your own branding to a product or tool by paying a fee to a provider.
There are two types of white labeling, or perhaps more accurately two uses for white labeling. Discussion of white labeling most commonly refers to the first type we’ll cover. However, we want to give equal attention to the second use.
In this article, we will explain the meaning of white labeling by discussing both types in detail and exploring the pros and cons of each.
Let’s begin.
The Difference Between Commissioning White Labeled Products and Using White Labeled Software
White labeling products are items you get a manufacturer to make, and then apply your own branding to.
It can be for commercial sale or used for the creation of promotional items. For example, the pens, and bags you see given away at conventions.
If you want a real-world retail example that's simple, consider the “house brands” offered by various supermarkets.
These products aren’t made by the supermarket, rather they’re created by a manufacturer. The supermarket pays to have their branding on the labels.
The second, and less discussed type, is white label software. With this, you buy a license to a saas solution and apply your own branding to the tool to present a professional and cohesive image.
The most common type of white-labeled software tool is email autoresponders.
White Label Products
So you now know that white-labeled products are products made by one party, but branded to another, who then sells. This process can benefit all parties by dividing the costs and efforts involved in the process of creating something and getting it to the end-user.
The manufacturer just has to worry about creating the product, while the brander just has to focus on marketing and selling it. In some cases the white label provider (brander) and the retailer can be separate parties, further splitting costs and responsibilities three ways:
The manufacturer to the brander to the retailer.
So what are the benefits of commissioning white label products?
The Benefits of White Labeled Products
The benefits are primarily saving costs, speeding up production, greater brand awareness, and the ability to expand into new niches.
Saving Costs
By using white labeled products, you can increase the profits that you make from each sale.
You won’t have to spend any money on the creation of manufacturing facilities, hiring staff, and other overheads. You spend money on a single thing, which is the cost of the product and the consecutive white label branding.
You’ll also most likely be buying these products from a mass producer who is creating similar products for others. If they’re producing at scale, typically they can provide the items at a cheaper rate than what it would cost you to produce from scratch.
Quicker Rollout
Because everything is already in place on the manufacturer’s end, this means a quicker rollout for you. Everything is already set up, you just have to tell them what you need, and provide your branding.
Expand Into New Niches
Any sort of production requires specialization in terms of the tools needed, the staff required, right on through to the supply lines for raw materials. White label service simplifies everything.
The scale of specialization needed otherwise makes it difficult for smaller entities to diversify their offerings.
For example, if you wanted to offer stationery, canned foods, and clothing, those are three very different areas that require radically diverse tools and expertise.
The logistics and costs involved to produce your own would be massive, but white labeling would allow you to easily offer these products by simply commissioning three different manufacturers.
In turn, you could expand into various areas while only needing to research the market, while not worrying about their creation.
The Potential Downsides of White Label Business Products
Of course, commissioning white label products has its challenges. Primarily they are customer perception, a lack of control on production, and competition.
Customer Perception
There’s always the risk that customers could perceive your products as generic. This could cause a reluctance to buy them, depending on what you’re selling.
Looking at some survey responses, customers are more likely to buy generic consumables, but far less likely to buy generic appliances or clothing.
It appears that the longer a shopper will own an item, the more likely they are to purchase a brand name.
Competition
Since you’re buying white labeled items from big manufacturers, you won’t be the only buyer. This means that there are others out there selling, quite literally, the very same products as you, albeit with different branding.
If you don’t have strong branding, or if another white label brand has an established presence, you could see your items being passed over for your competition.
Lack of Customizability
Both of the challenges above stem from this one.
The manufacturers are producing bulk items that are uniform. The only difference is the label. It would be difficult and costly to customize each item to your specifications in most instances.
The only thing you can control is your white label brand, marketing, and to a degree your pricing.
Solutions to Challenges
Ultimately you must distinguish yourself through your marketing and by setting competitive prices.
You could also try and find a geographical market that lacks a certain product. This will reduce competition, and make your product stand out through scarcity.
White Labeled Software
In the next part of our “what is white labeling” guide, we’ll look at software. These white label tools are created and managed by one company, and licensed to another with their branding applied.
It is most common in tools that are “front end”, meaning the things the client company’s customers see, such as emails, landing pages, and even reports.
The white labeling of software differs depending on the provider. Some companies offer white labeling for free, while others charge a premium for it.
The Benefits of Using a White Label Solution
The benefits of white labeled software are similar to those of white label products. The difference is that software is more often supplementary.
Save Costs on Development
Developing proprietary software is expensive, complicated, and requires constant maintenance.
By making use of another company's tools, you are saving a lot of money and effort that would otherwise have to be spent on a sizable team dedicated to each tool.
Fast Deployment
Along with the costs and effort, developing tools takes a lot of time. It could take months or years to get started. With white-labeled software, you can get started quickly.
These software white label companies provide smooth onboarding and are geared towards deploying their tools to clients from brick and mortar “mom and pop” shops, up to full corporates.
Brand Cohesion
If you’re running an online store, but your customers are receiving emails from a different domain, they may feel your site is sketchy or at least unprofessional.
White-labeled software means that no matter what tool you use it will be branded to you. You're also ensuring quality, because email providers etc work hard to maintain that, meaning your service delivery benefits from it.
The Downside of Using White Label Website Tools
The only real downside to using white label software is a slight lack of customizability, but it isn’t as pronounced as it is with physical white label products.
Software companies are geared towards providing specific tools and, depending on what you need, there will be one that suits you. Also, because the offerings are digital, it makes it a lot easier to alter the interface while leaving the mechanics in place.
These tools are designed to be rebranded. Therefore the templates will have a lot of options for how they’re presented and contain your logos, corporate colors, and so on.
Conclusion
So there’s the answer to “what is white labeling?”, you know the meaning of white labeling, and some of its benefits and challenges.
It can be a great way to bolster your existing offerings or expand your business into new niches, at a reduction in cost, effort, and time.
As a final word, remember that the offerings will ultimately reflect on your brand. So research your manufacturers and providers well before making a decision.
Garan is a writer interested in how tech reshapes the environment, and how the environment reshapes tech. You'll usually find him inoculating against future shock and arguing with bots.
